Opec Secretary General Haitham Al Ghais is “cautiously optimistic” on China's reopening, but said that a slowdown in the US and the EU could dampen crude oil demand this year.
“There is phenomenal demand growth in Asia, [but] what concerns us more is actually the slowdown we see in Europe and the US in terms of the financial situation [and] the inflation,” Mr Al Ghais said at the CERAWeek energy conference in Houston on Tuesday.
“We see a kind of a divided market … one market with promising growth [and] the other side with a slowdown.”
Last month, Opec raised its 2023 oil demand forecast by 100,000 barrels per day amid expectations of an economic rebound in China, the world's largest crude importer.
The group expects global oil demand to grow by 2.3 million bpd this year, which is higher than its previous estimate of 2.2 million bpd growth.
“China was closed down for most of last year, so that element plays into our demand figure … We figured China alone will count for about 500,000 bpd to 600,000 bpd of demand improvement,” said Mr Al Ghais.
The Opec chief also said he was not concerned about the redirection of Russian crude oil to Asia.
“We've always seen redirection of flows, whether it's related to geopolitical events or demand centres being created [or] others disappearing,” said Mr Al Ghais.
“I think the market is actually big enough with demand improving.”
Despite western sanctions, Russian oil exports in January rose by 300,000 bpd from a month ago to 8.2 million bpd, the International Energy Agency reported last month.
Meanwhile, the country’s export revenue stood at $13 billion, slightly higher than in December, but down 36 per cent from the same period a year ago.
Mr Al Ghais urged oil and gas companies to boost investment to avoid potential shortages in the future.
“One of the key components of providing [energy] security is having the right investments and investments take a long time to come into actual production,” he said.
In its World Oil Outlook last year, Opec said that $12.1 trillion of oil and gas spending would be required until 2045.
“We're talking about over $500 billion every year. We're not seeing those levels yet and unless this happens, I'm afraid that we could be facing issues in the future with regards to energy security and … affordability,” said Mr Al Ghais.
Energy companies require the “security of demand” before embarking on multibillion-dollar projects with long lead times, he said.
Companies cannot be expected to invest $50 billion or $60 billion only to be informed after a decade that their oil or gas will not be necessary any more, said Mr Al Ghais.
“With security of supply, there is also a requirement for security of demand and the two fit in together like hand in glove.”
Mr Al Ghais also backed comments made by Cop28 President-designate Dr Sultan Al Jaber at the conference on Monday.
Dr Al Jaber, who is also the UAE's Minister of Industry and Advanced Technology and special envoy on climate change, said that the oil and gas sector needs to rapidly decarbonise its operations.
"This is something that we're preaching in the Opec. We believe that the oil and gas industry has to transform. We have to decarbonise our operations," said Mr Al Ghais.
"I think the world has to come to the sense of reality that all forms of energy will be needed. The issue is how to reduce emissions."
Brent, the benchmark for two thirds of the world’s oil, was 0.10 per cent lower at $83.21 a barrel at 11.09am UAE time on Wednesday.
West Texas Intermediate, the gauge that tracks US crude, was down 0.28 per cent at $77.36 a barrel.
